Tata Sons announces Air India, Vistara merger
Partner Singapore Airlines to acquire 25.1 per cent stake of Rs 2,058.5 crore in Air India
The year 2022 began with the Tata Group formally welcoming back Air India under its wings. With this, the Group was left with four carriers – low-cost AirAsia India, full-service carrier Vistara, the newly acquired Air India and low-cost international service provider Air India Express. And it was only a matter of time before the Group would do something about operating two full-service carriers. Now, as the year 2022 gets ready to bid goodbye, Tata Sons has announced the merger of Air India and Vistara.
At present, Vistara is operated under a joint venture of Tata with Singapore Airlines – Tata SIA Airlines. As per the decision announced by the Tata Group on Tuesday, the deal for the merger of the two carriers will include Singapore Airlines acquiring a 25.1 per cent stake in the former national carrier. Vistara is the second largest domestic carrier and Air India is the third. Together, their market share stood at 18.3 per cent in October. With this deal, Air India will become second largest domestic carrier and the largest international carrier in India. The deal is expected to be completed by March 2024.
In a statement, Singapore Airlines said, “Singapore Airlines (SIA) and Tata Sons (Tata) have agreed to merge Air India and Vistara, with SIA also investing Rs 20,585 million (S$360 million, US$250 million) in Air India as part of the transaction. This would give SIA a 25.1 per cent stake in an enlarged Air India group with a significant presence in all key market segments. SIA and Tata aim to complete the merger by March 2024, subject to regulatory approvals. SIA and Tata have also agreed to participate in additional capital injections, if required, to fund the growth and operations of the enlarged Air India in FY2022/23 and FY2023/24.” SIA said that with this merger, it will not only reinforce its partnership with Tata, but “immediately acquire a strategic stake in an entity that is four to five times larger in scale compared to Vistara”.
Natarajan Chandrasekaran, Chairman, Tata Sons, said, “The merger of Vistara and Air India is an important milestone in our journey to make Air India a truly world-class airline. We are transforming Air India, with the aim of providing great customer experience, every time, for every customer. As part of the transformation, Air India is focusing on growing both its network and fleet, revamping its customer proposition, enhancing safety, reliability, and on-time performance. We are excited with the opportunity of creating a strong Air India which would offer both full-service and low-cost services across domestic and international routes. We would like to thank Singapore Airlines for their continued partnership.”
At present, not much has been revealed of what would become the merged entity, so the details regarding its branding, frequent flyer programmes, uniform and intricacies regarding the management and the staff capacity are yet to be known. However, it seems likely that the Vistara brand name might discontinue and the new entity might operate under the Air India branding itself.
On the passenger front, the consolidation is likely to provide passengers with more options as Vistara’s economy, premium economy and business class offerings could merge with Air India’s economy, business and first class ones.
Commenting on the news of the merger, Centre for Asia Pacific Aviation India (CAPA India) said, “CAPA India welcomes the announcement of the merger between Air India and Vistara, which is on expected lines. As a result, over the next few years we expect to see the emergence of Air India as a global network carrier in terms of size, scale and standards of service. India needs a high quality, dependable long haul and ultra-long haul airline to meet the country’s air connectivity requirements. The combined entity is in line with India’s aspirations to be a USD 5 trillion economy.”
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